Chapter 15: Marketing Channels and Supply Chain Management


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Chapter 15: Marketing Channels and Supply Chain Management

  1. 1. Marketing Channels and Supply Chain Management Dr. John T. Drea Professor of Marketing Western Illinois University
  2. 2. Basic Terms & Concepts <ul><li>Place </li></ul><ul><ul><li>“ making goods and services available in the right quantities and locations - when customers need them” </li></ul></ul><ul><ul><li>Place decisions include which middlemen will handle the product, which stores will carry the product, how will the product get the exposure needed </li></ul></ul><ul><li>Wholesaler: someone who sells to retailers or industrial customers, but doesn’t sell in large amounts to final consumers </li></ul><ul><li>Retailer: someone who sells to final consumers </li></ul>
  3. 3. Basic Terms & Concepts <ul><li>Marketing channel (aka Channel of Distribution) </li></ul><ul><ul><li>“ a set of interdependent organizations that ease the transfer of ownership as products move from producer to consumer/user” </li></ul></ul>Manufacturer Wholesaler Retailer Consumer An example of a marketing channel. <ul><li>Channels: </li></ul><ul><li>Provide specialization </li></ul><ul><li>Overcome discrepancies </li></ul><ul><li>Provide contact efficiency </li></ul>
  4. 4. Basic Terms & Concepts <ul><li>Direct vs. Indirect Channels </li></ul><ul><ul><li>Direct - straight from the mfg. to consumer </li></ul></ul><ul><ul><li>Indirect - uses 1+ middlemen/intermediaries </li></ul></ul>or or or many other possibilities… Manufacturer Consumer Manufacturer Wholesaler Retailer Consumer Manufacturer Retailer Consumer Manufacturer Wholesaler A Wholesaler B Retailer Consumer
  5. 5. Why do we use intermediaries? <ul><li>To simplify and reduce transactions. </li></ul>A B C D E 1 2 3 4 5 or A B C D E 1 2 3 4 5 Marketing Intermediary Effects on consumer search processes? Ease of finding buyers?
  6. 6. Other channel arrangements Dual Distribution When a producer uses two or more channels (ex: Gateway Computers) Strategic Channel Alliances <ul><li>A partnership which involves the use of the previously-established channel of another organization </li></ul><ul><li>Useful when… </li></ul><ul><li>Creating a channel will command too many resources </li></ul><ul><li>Cultural or other differences will inhibit growth in international markets. </li></ul>
  7. 7. Why do we use intermediaries? To provide… <ul><li>Transactional functions </li></ul><ul><ul><li>Contracting and promoting </li></ul></ul><ul><ul><li>Negotiating </li></ul></ul><ul><ul><li>Risk taking (inventory) </li></ul></ul><ul><li>Logistical Functions </li></ul><ul><ul><li>Sorting (bulk-breaking, assorting) </li></ul></ul><ul><ul><li>Storing </li></ul></ul><ul><ul><li>Physically distributing (transporting and sorting goods) </li></ul></ul><ul><li>Facilitating Functions </li></ul><ul><ul><li>Financing </li></ul></ul><ul><ul><li>Researching (gathering info on channel members & customers) </li></ul></ul>
  8. 8. Distribution strategies <ul><li>Intensive Distribution </li></ul><ul><ul><li>Selling through all appropriate intermediaries </li></ul></ul><ul><li>Selective Distribution </li></ul><ul><ul><li>Selling through only those intermediaries that will give the product special attention </li></ul></ul><ul><li>Exclusive Distribution </li></ul><ul><ul><li>Selling through only one intermediary in a given geographic area </li></ul></ul>
  9. 9. Choosing a distribution strategy <ul><li>Intensive distribution can be costly, but so are lower sales! </li></ul><ul><li>However, exclusive distribution can motivate intermediaries. </li></ul><ul><li>Will customers search for my product? </li></ul><ul><li>Do I need cooperation from channel members, or to encourage intermediaries to handle my product? </li></ul>
  10. 10. Types of distribution systems <ul><li>Traditional </li></ul><ul><li>Administered: informal agreement to cooperate </li></ul><ul><li>Contractual: agreement to cooperate is contractual </li></ul><ul><li>Corporate: a corporation owns/controls intermediaries (Sherwin-Williams) </li></ul>
  11. 11. Supply Chain Management <ul><li>Determining channel strategy and distribution intensity </li></ul><ul><li>Managing relationships in the supply chain </li></ul><ul><li>Managing logistical components </li></ul><ul><ul><li>Movement of information and requirements </li></ul></ul><ul><ul><li>Planning of production and inventory levels </li></ul></ul><ul><ul><li>Movement and storage of raw materials </li></ul></ul><ul><ul><li>Movement of finished goods to intermediaries and buyers </li></ul></ul><ul><li>Balancing cost and customer service </li></ul>
  12. 12. Trends in Supply Chain Management Advanced Computer Technology (ex: bar codes, RFID, pick to light, etc.) Outsourcing Logistics Functions (ex: 3PL) Electronic Distribution (ex: music, software, postage)